New forecasts won’t prompt further asset purchases

The main purpose of the Bank of Japan’s PolicyBoard meeting next Tuesday (30th) is for it toupdate its forecasts for GDP and inflation.Historically, policy setting has taken a backseat inthe second monthly meetings in April andOctober, however over the last year thepublication of new economic forecasts hasprovided the backdrop, as well as the justification,for simultaneous monetary easing. Several analyststhink the Bank will ease further at next week’smeeting, but we think the Bank will leave its assetpurchase program unchanged, for now at least,and shift its attention to improving the economy’sgrowth potential. Doing so would increase thebenefits from the already extremelyaccommodative monetary conditions.